Groves v. Dep't of Corr.

• Decision Date: 06 December 2011
• Docket Number: Docket No. 302640.
• Citation: 295 Mich.App. 1,811 N.W.2d 563
• Parties: GROVES v. DEPARTMENT OF CORRECTIONS.
• Court: Court of Appeal of Michigan — District of US

295 Mich.App. 1

811 N.W.2d 563

GROVES

v.DEPARTMENT OF CORRECTIONS.

Docket No. 302640.

Court of Appeals of Michigan.

Submitted June 10, 2011, at Lansing.Decided Dec. 6, 2011, at 9:00 a.m.

Varnum LLP (by Bryan R. Walters), Grand Rapids, for Ralph Groves, Helen McCoy, William Scott, Michael Schnurer, Michael Stump, and Securus Technologies, Inc.

Bill Schuette, Attorney General, John J. Bursch, Solicitor General, Richard A. Bandstra, Chief Legal Counsel, and Matthew C. Keck and Jennifer M. Jackson, Assistant Attorneys General, for the Department of Corrections and the Department of Technology, Management and Budget.

Dykema Gossett PLLC (by Gary P. Gordon, Leonard C. Wolfe, and Courtney F. Kissel), Lansing, for Public Communications Services, Inc.

Before: WHITBECK, P.J., and MARKEY and KIRSTEN FRANK KELLY, JJ.

MARKEY, J.

Plaintiffs appeal by right from an order granting defendants summary disposition and dismissing plaintiffs' case for lack of standing.¹ PLAINTIFFS CHALLENged a contract bidding process run by the Department of Corrections (DOC) and the Department of Technology, Management and Budget (DTMB; collectively, the state). We affirm.

The DTMB issued a request for proposal (RFP) on behalf of the DOC, soliciting proposals for the installation and maintenance of inmate telephone systems (ITS) at the DOC's facilities. The state would not directly pay the ITS provider but would expend funds administering the contract and monitoring inmate use of the system. Seven companies submitted timely bids, including plaintiff Securus Technologies, Inc., and defendant Public Communications Services, Inc. (PCS). A committee was to recommend the bidder who offered the best value in terms of technical criteria and price. Plaintiffs claim that the committee allowed PCS to alter its pricing proposal after the deadline without granting a similar opportunity to other bidders. Plaintiffs further claim that the committee erred in a number of ways in evaluating the bid proposals. PCS won the contract, and plaintiffs filed suit requesting an order nullifying the contract and requiring a rebid.

I. STANDARD OF REVIEW

This Court reviews de novo a trial court's decision to grant summary disposition. Maiden v. Rozwood, 461 Mich. 109, 118, 597 N.W.2d 817 (1999). Whether a party has standing is a question of law subject to review de novo. Manuel v. Gill, 481 Mich. 637, 642, 753 N.W.2d 48 (2008). Questions of statutory interpretation are also subject to review de novo. Id. at 643, 753 N.W.2d 48.

II. STANDING

The general rule regarding standing is set forth in Lansing Sch. Ed. Ass'n v. Lansing Bd. of Ed., 487 Mich. 349, 372, 792 N.W.2d 686 (2010) ( LSEA ):

[A] litigant has standing whenever there is a legal cause of action. Further, whenever a litigant meets the requirements of MCR 2.605, it is sufficient to establish standing to seek a declaratory judgment. Where a cause of action is not provided at law, then a court should, in its discretion, determine whether a litigant has standing. A litigant may have standing in this context if the litigant has a special injury or right, or substantial interest, that will be detrimentally affected in a manner different from the citizenry at large or if the statutory scheme implies that the Legislature intended to confer standing on the litigant.

Michigan jurisprudence has never recognized that a disappointed bidder such as Securus has the right to challenge the bidding process. See Talbot Paving Co. v. Detroit, 109 Mich. 657, 67 N.W. 979 (1896), and Rayford v. Detroit, 132 Mich.App. 248, 256–257, 347 N.W.2d 210 (1984).

Plaintiffs first argue that common law allows taxpayers a cause of action to enforce Michigan's public bidding requirements; therefore, the individual plaintiffs have the requisite standing. Although early cases appear to support this position, see e.g., Berghage v. Grand Rapids, 261 Mich. 176, 177, 246 N.W. 55 (1933), more recent cases uniformly condition taxpayer standing on the plaintiff taxpayers having suffered some harm distinct from that inflicted on the general public. LSEA, 487 Mich. at 372, 792 N.W.2d 686; Waterford Sch. Dist. v. State Bd. of Ed., 98 Mich.App. 658, 662, 296 N.W.2d 328 (1980). Plaintiffs have not alleged a cognizable injury. There is no allegation in the complaint that Securus would have won the contract but for the claimed errors in the bid evaluations. Indeed, when the government has broad discretion to choose its contractors, a bidder has no expectancy in the contract to be awarded. See Cedroni Assoc., Inc. v. Tomblinson, Harburn Assoc., Architects & Planners, Inc., 290 Mich.App. 577, 590, 802 N.W.2d 682 (2010) (Murphy, C.J.); id. at 621–624, 802 N.W.2d 682 (K.F. Kelly, J., dissenting); see also Trepel v. Pontiac Osteopathic Hosp., 135 Mich.App. 361, 378, 354 N.W.2d 341 (1984). The committee evaluating the bids at issue here had substantial discretion to determine their technical and financial merits.

Plaintiffs alleged that all taxpayers were harmed by the faulty process and that the individual plaintiffs suffered particular harm because they could lose their jobs. This alleged harm is not the type of injury contemplated by the standing inquiry. The individual plaintiffs had no expectancy that the state would award the contract to their employer. Moreover, the state cannot control the personnel decisions of bidders for its contracts. Indeed, if this were considered a sufficient injury, the general rule that a disappointed bidder does not have standing would be completely eliminated. Disappointed bidders could simply threaten to fire an employee if they did not win the contract and thereby claim standing to bring suit.

Further, even if plaintiffs' factual allegations are true, there is no harm to the general public. There will be no increased expenditures by the state that will have an impact on taxpayers, including the taxpayer plaintiffs. Additional costs of the winning bid will instead be charged only to inmates and the people they call from prison. Plaintiffs, either as individuals or as members of the general public, have not suffered a cognizable injury.

In fact, while they ostensibly seek to rectify a public wrong, in reality, as employees of the disappointed bidder for a government contract, plaintiffs seek to further their own interests and circumvent the century-old rule that denies standing to disappointed bidders to challenge the discretionary award of a public contract. Talbot, 109 Mich. at 661–662, 67 N.W. 979; Rayford, 132 Mich.App. at 256, 347 N.W.2d 210. “ Though the act accepting the second [lowest] bid may have been against the interest of the citizens, certainly the plaintiff[, the disappointed bidder,] could have no action to redress that wrong and injury.” Talbot, 109 Mich. at 662, 67 N.W. 979. The rule recognizes that competitive bidding on public contracts is designed for the benefit of taxpayers and not those seeking the contract. Id.; Rayford, 132 Mich.App. at 256, 347 N.W.2d 210. Put differently, the purpose of competitive bidding is to guard against favoritism, fraud, corruption, and “ to secure the best work at the lowest price practicable....” Lasky v. City of Bad Axe, 352 Mich. 272, 276, 89 N.W.2d 520 (1958) (quotation marks and citation omitted). What is in the public interest must be assessed by weighing numerous factors, of which, price will be one of many that may affect that determination. See e.g., Cedroni Assoc., 290 Mich.App. at 591–593, 802 N.W.2d 682 (concluding that under the school district's fiscal management policy, the district was required to select the lowest responsible bidder), and Berghage, 261 Mich. at 181–182, 246 N.W. 55 (concluding that the defendant city was not required to select the lowest bidder for a printing contract when a higher bidder had a larger circulation).

Litigation aimed at second-guessing the exercise of discretion by the appropriate public officials in awarding a public contract will not further the public interest; it will only add uncertainty, delay, and expense to fulfilling the contract. See Great Lakes Heating, Cooling, Refrigeration & Sheet Metal Corp. v. Troy Sch. Dist., 197 Mich.App. 312, 314–315, 494 N.W.2d 863 (1992). The only circumstance that may provide a basis for an action to review the bidding process is the presence of evidence of “fraud, abuse, or illegality.” Id. at 315, 494 N.W.2d 863. But such an action must be brought by the proper public official. Rayford, 132 Mich.App. at 257, 347 N.W.2d 210, citing Attorney General ex rel. Allis–Chalmers Co. v. Public Lighting Comm. of Detroit, 155 Mich. 207, 118 N.W. 935 (1908). Opening the floodgates of litigation to every disappointed bidder that believes it has been aggrieved by the bidding process would serve neither the interests of the government nor of the citizen-taxpayers that the bidding process is designed to advance. Great Lakes Heating, 197 Mich.App. at 315, 494 N.W.2d 863.

Plaintiffs further assert that the allegations of fraud set forth in the complaint provide both the taxpayers and Securus with standing to seek injunctive relief under the exception discussed in Great Lakes Heating. We conclude, however, that in addition to not being proper parties, Rayford, 132 Mich.App. at 257, 347 N.W.2d 210, plaintiffs have failed to state a claim for fraud. When alleging fraud, “the circumstances constituting fraud or mistake must be stated with particularity,” although “conditions of mind may be alleged generally.” MCR 2.112(B). Although plaintiffs state with particularity a number of errors the state allegedly made during the bidding process, these allegations do not constitute fraud without evidence of defendants' state of mind. See Hord v. Environmental Research Institute of Mich. (After Remand), 463 Mich. 399, 404, 617 N.W.2d 543 (2000). Plaintiffs do not allege that defendants have agreed that they made mistakes, nor is there any reason to think that defendants intended to damage Securus's...